Sixth Circuit Affirms §1927 Sanctions on Plaintiff’s Attorney for Maintaining Untimely ADA Lawsuit Where Plaintiff Failed to Notify EEOC of Changed Address

Yesterday, the Sixth Circuit affirmed sanctions against a plaintiff’s attorney under §1927 in the amount of $25,995.32 for pursuing an ADA lawsuit that was not filed until more than nine months after the EEOC mailed his client its right-to-sue letter.  Carter v. Hickory Healthcare, Inc. No. 17-4199 (6th Cir. 9-27-18).  The plaintiff had notified the OCRC of her change of address, but had failed to similarly notify the EEOC. Thus, when the EEOC finally mailed her RTS letter, it was sent to her former address and her attorney did not discover this mistake for months.  The Court rejected a tolling argument based on the EEOC’s failure to mail a copy to her attorney (whose address had not changed). “It thus is not true that “a failure by the EEOC to copy counsel on a right-to-sue letter prevents the ninety-day period from running.”  Ball v. Abbott Advert., Inc., 864 F.2d 419, 421 (6th Cir. 1988).”

According to the Court’s opinion, the plaintiff had filed her Charge of Discrimination six years earlier in 2007 with the Ohio Civil Rights Commission and it was dual filed with the EEOC.  The OCRC ultimately found in 2013 that she had been subject to unlawful discrimination when she was terminated for refusing to monitor client smoking breaks that aggravated her asthma after previously notifying the defendant employer of her medical condition, which it had accommodated until she was assigned a new supervisor.   While the OCRC processed her dual-filed charge, the plaintiff had moved, had notified the OCRC of her change of address, but failed to similarly notify the EEOC.  Although her attorney requested that the EEOC issue her a RTS letter, he apparently similarly failed to notify the EEOC of her new address.  The EEOC mailed the RTS letter to her former address and this was not discovered by her attorney for approximately six months, even though the statute of limitations to file an ADA action is 90 days after the RTS letter has been issued.  The 90 days begins to run on the fifth day after the EEOC mails the RTS.  

[A] judge may impose sanctions under § 1927 when a lawyer objectively “falls short of the obligations owed by a member of the bar to the court.”  Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006) (quotation omitted).  The lawyer need not have “subjective bad faith” but must act with “something more than negligence or incompetence.”  Id.  A court may impose the sanction if an attorney “abuses the judicial process or knowingly disregards the risk” that he will needlessly multiply the proceedings.  Id.  Maintaining a clearly time-barred lawsuit constitutes a classic example of conduct that warrants a sanction.  See, e.g., Davis v. Bowron, 30 F. App’x 373, 376 (6th Cir. 2002).

The Court rejected the argument that the employer defendant failed to mitigate its expenses by waiting to file a summary judgment motion instead of a motion to dismiss soon after the Complaint was filed.  The defendant employer’s attorneys had notified the plaintiff’s attorney in writing that the lawsuit was clearly untimely and so the attorney’s liability began upon the receipt of that letter.   Interestingly, the district court denied the employer’s Motion for Rule 11 sanctions and that decision was not appealed.

The Court similarly rejected the plaintiff’s argument that her notification to the OCRC of her new address should have been sufficient after the OCRC informed her that it would share information with the EEOC because the EEOC rules clearly provide that it must be provided with separate notice. 29 C.F.R. § 1601.7(b).  While her mistake was understandable, it was not excusable.  She could have, for instance, inquired much earlier about why she had not received the RTS notice.

The Court also rejected the attorney’s argument that he thought that equitable tolling would apply to suspend the 90 days due to the mistaken address and the EEOC’s failure to also send him a copy of the RTS letter when it was mailed to his client’s former address.

But these arguments were leaky at best, frivolous at worst.  That a regulation required the Commission to send some types of attorneys a copy of the right-to-sue letter does not justify equitable tolling.  The regulation applies only to public sector claims, not private sector ones like Carter’s.  See 29 C.F.R. §§ 1614.103(b), 1614.605(d).  It thus is not true that “a failure by the EEOC to copy counsel on a right-to-sue letter prevents the ninety-day period from running.”  Ball v. Abbott Advert., Inc., 864 F.2d 419, 421 (6th Cir. 1988).

Much of the opinion discusses the appropriate standard of review of a Magistrate recommendation and appellate jurisdiction.  Neither party raised this on appeal.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney. 

Supreme Court: Fiduciary Duty to Continually Monitor Investments Makes Limitations Period a Moving Target

This morning, a unanimous Supreme Court reversed an employer fiduciary’s judgment on a breach of fiduciary duty claim that had been found untimely.  Tibble v. Edison Int’l, No. 13-550 (5-18-15).  The plaintiffs alleged that the fiduciaries violated their duty by paying higher administrative fees for retail funds instead of selecting lower-fee investor class funds while administering the defined contribution ERISA plan (i.e., a 401(k) plan). Based on ERISA’s 6-year statute of limitations, the lower courts found the claim to be untimely as to funds purchased in 1999.  However, the Supreme Court concluded that “a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones. A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.”

Section 1113 [of ERISA] reads, in relevant part, that “[n]o action may be commenced with respect to a fiduciary’s breach of any responsibility, duty, or obligation” after the earlier of “six years after (A) the date of the last action which consti­tuted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation.” Both clauses of that provision require only a “breach or violation” to start the 6-year period.

While the “Ninth Circuit correctly asked whether the ‘last action which constituted a part of the breach or violation’ of respondents’ duty of prudence occurred within the rele­vant 6-year period,” that court erred in finding the act of selecting the higher-cost funds to be the last relevant action for statute of limitation purposes.

Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting invest­ments at the outset. . . ., the trustee must “systematic[ally] conside[r] all the investments of the trust at regular intervals” to ensure that they are appro­priate.

The Uniform Prudent Investor Act confirms that “[m]anaging embraces monitoring” and that a trustee has “continuing responsibility for oversight of the suitability of the investments already made.”

This being said, the Court “express[ed] no view on the scope of respondents’ fiduciary duty.”  It remanded the case to consider whether the fiduciaries failed to review and monitor within the six year limitations period.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit ERISA Decisions from August

The Sixth Circuit issued three interesting ERISA decisions last month. In the first case, the Court affirmed dismissal of the LTD claim as untimely where the plan provided a limitations period of three years from when the initial proof of claim was required and the plaintiff filed suit within 8 months after the conclusion of her internal appeal following a contractual change in the eligibility standard.  In the second decision, the Court affirmed denial of LTD benefits on the basis of physical disability, but reversed on the mental disability LTD claim.  In the third case, the decision of the claims administrator (aka insurance company) on medical coverage was repeatedly reversed in three court appeals for refusing to consider and/or explain why it was not accepting the medical recommendations of the treating physicians for inpatient alcohol rehabilitation after several failed attempts at outpatient rehabilitation as provided in the insurance company’s internal guidelines. Ultimately, the court decided that the decision was arbitrary and capricious and ruled in favor of the claimant.

In Russell v. Catholic Partners Employee LTD Plan, No. 13-4804 (6^th Cir. 8-14-14), the nurse claimant submitted a claim for LTD benefits based on a knee and mental impairment which prevented her on May 12, 2007 from continuing the RN job she had held for 30 years.   Her LTD benefits were granted on November 15, 2007 since she was unable to continue her regular occupation.  However, she was also informed at that time that the standard of eligibility changed after two years and she would then be required to show that she was unable to work in any gainful occupation in order to continue receiving LTD benefits.   After the two years passed, her claim for LTD was denied since the insurance carrier determined that she could perform work as a case manager or triage nurse despite her physical and mental impairments.  The claimant appealed internally and the final denial was issued on July 20, 2010.  When the claimant initiated a federal court lawsuit on March 20, 2011, the carrier moved to dismiss on the grounds that the statute of limitations had run. 

The LTD Plan required written proof of a claim to be submitted within 90 days of the 180-day elimination period.   It also provided that a federal lawsuit could be initiated 60 days after proof of the claim had been submitted and within 3 years after the proof of claim was required.   The Court determined that the proof of claim was required to be submitted by February 8, 2008 and, therefore, the limitations period expired on February 8, 2011 – fifty days before the claimant initiated the lawsuit.   The Court rejected the claimant’s argument that the limitations period was re-set by the application of a different eligibility standard on November 12, 2009. “The Supreme Court recently held “a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.”  In this case, the claimant had six months after the final denial of her LTD claim on July 20, 2010 to file suit before the three-year limitations period expired. “The plan’s use of the “any gainful occupation” standard did not reset the contractual limitations period.”  The Court also refused to re-set the limitations period each time the carrier requested new evidence supporting proof of continuing disability. 

In Hayden v. Martin Marietta Materials Inc. Flexible Benefits Program, No. 13-6319 (6^th Cir. 8-18-14), the claimant left work in January 2010 because of a variety of physical ailments and mental impairments (depression and anxiety).  She sought and was awarded SSI benefits.   However, she was denied LTD by her employer’s claims administrator on the grounds that her physical ailments were objectively insufficient to render her unable to work in her profession (as an office manager) and her mental impairments were not sufficiently severe to prevent her from working.  The Court agreed that the claimant failed to show that she was physically unable to work during the entire 180-day elimination period. For instance, her physician’s notes did not mention her arthritic hands until eleven months after she stopped working and similarly did not discover other conditions until after the elimination period. Her “minor” heart condition from 2008 similarly did not prevent her from working.   Therefore, the plan’s decision to deny benefits on this basis was not arbitrary or capricious.

The Court reversed the claims administrator, however, on the mental disability claim because the reviewer imposed a higher standard than the criteria outlined in the plan documents.  The reviewer denied benefits on the grounds that the claimant could perform some work, instead of evaluating whether she was mentally capable of continuing to perform her own profession.  Indeed, the reviewer’s decision “suggests that Hayden would have had to be suffering from “severe psychiatric symptoms, suicidal ideation, homicidal ideation, hallucinations” to be considered disabled.” This decision would effectively preclude any claimant from showing that depression or anxiety as a “disability— [and] is inconsistent with the terms of the Plan, which focus on whether a claimant can perform the material and substantial duties of her own occupation.”  The reviewer also denied benefits in part because he was influenced by the fact that the claimant’s employer was going through bankruptcy.  The treating physicians and psychiatrist had explained that her anxiety was related to her own health problems and those of her husband.  

It is true, as a general matter, that when a plan administrator relies on the opinion of one doctor over that of another, “the plan administrator’s decision cannot be said to have been arbitrary and capricious because it would be possible to offer a reasoned explanation, based upon the evidence, for the plan administrator’s decision.”  . . . . But ERISA does not grant to a plan administrator carte blanche to adopt the opinions of its reviewing physicians. When a reviewing physician’s report is “inadequate,” a plan administrator cannot be said to engage in a deliberate, principled reasoning process when it adopts the position of that report.  . . .  In particular, where a reviewing physician’s opinion applies standards that conflict with the terms of the plan, that opinion is not evidence supporting a conclusion that the claimant is not disabled within the meaning of the plan.

Instead of remanding the case for another review, the Court awarded benefits to the Claimant based on her mental disability in light of the uncontroverted evidence.

In Butler v. United Healthcare of Tennessee, Inc,  No. 14-6446 (6^th Cir. 8-22-14), the claimant was a long-time alcoholic, who attempted a variety of outpatient treatment programs before finally admitting herself into an inpatient facility in 2005.  Her husband’s insurance company denied coverage, although she seemed to meet the insurance carrier’s internal criteria (as they belatedly discovered only after initiating the litigation), of having a “[h]istory of continued and severe substance abuse despite appropriate motivation and recent treatment in an intensive outpatient or partial hospitalization program.”  Her husband paid for her inpatient treatment and pursued two internal appeals of the denial of coverage.   The external reviewer hired for the third internal appeal was given an incorrect standard by the insurance company and failed to explain why he disagreed with the recommendations of the claimant’s two treating physicians or mention the claimant’s history of failed outpatient rehabilitation.   After litigation commenced in 2008, the carrier realized it had given the wrong standard to the external reviewer and attempted to correct that mistake, but the reviewer affirmed his prior decision and still failed to explain why he disagreed with the recommendations of the claimant’s two treating physicians or mention the claimant’s history of failed outpatient rehabilitation.   

The Court agreed that the insurance carrier had not completed a complete or fair review of the case and remanded it for the carrier to explain why it disagreed with the recommendations of the claimant’s two treating physicians and why the claimant’s history of failed outpatient rehabilitation was irrelevant.  Instead, the carrier obtained another letter from the same external physician claiming that he believed he had previously reviewed the letters from the treating physicians and, in any event, after reviewing the file again he still believed coverage should be denied, but still did not explain why he disagreed with the treating physicians.  The Court remanded the case again for the insurance carrier to retain a different external reviewer, explain why it disagreed with the treating physicians and permit the submission of new medical information.  The claimant submitted new medical information that specifically addressed the carrier’s internal criteria for inpatient treatment (which was not disclosed until after litigation commenced).  While the carrier retained a new external reviewer, it suggested that the reviewer should not give much weight to the new medical information.  The reviewer, in turn, made the same mistakes as the first reviewer:  He denied coverage without explaining why he disagreed with the treating physicians or why the claimant’s unsuccessful outpatient treatment did not qualify under the carrier’s own criteria.  Accordingly, the Court granted judgment for the claimant and the Sixth Circuit affirmed.  

United’s refusal to give Janie’s benefits claim a fair review not once, not twice, but three times—in spite of clear instructions from the district court—casts a pall over United’s handling of the claim from the start. Through it all, through three chances to get it right (indeed through three chances just to engage in a nonarbitrary decision-making process), United failed the Butlers in multiple ways. United never explained its disagreement with the opinions of Janie’s treating physicians, which all contained detailed accounts of her prior attempts to get sober using increasingly intensive outpatient programs and which unequivocally deemed residential treatment necessary.  . . .United ignored key pieces of evidence and the key guideline applicable to Janie’s claim, making factually incorrect assertions (e.g., Janie had no history of trying unsuccessfully to treat her addiction with outpatient treatment),  . . ., or remaining silent about the matter,  . . . or (worst of all) mentioning the prior failures but nonetheless concluding without explanation that she did not meet the guideline requirements,  . . .. And United stacked the deck against the claim, instructing reviewers to “disregard” the evidence that John submitted in favor of the “contemporaneous physician-authored documents” that it had entered in the record.

                . . .

United adds that the decision to deny benefits cannot be arbitrary and capricious because five reviewing physicians agreed with it. That reviewing physicians paid by or contracted with the insurer agree with its decision, though, does not prove that the insurer reached a reasoned decision supported by substantial evidence. The physicians’ opinions carry weight only to the extent they provide a fair opinion applying the standard for granting benefits to the facts of the case. Elliott, 473 F.3d at 619. The reviewing physicians did not do that. They misstated or omitted the key fact of Janie’s prior failed outpatient treatment and ignored United’s guideline that allowed residential rehabilitation where outpatient treatment had not worked in the past. This argument, too, proves too much. If a decision to deny benefits could never be arbitrary and capricious when backed by the insurer’s reviewing physicians, court review would be for naught. The insurer would invariably prevail so long as the insurer had physicians on its staff willing to confirm its coverage rulings. That also does not make sense.

The District Court had also penalized the carrier for failing to earlier provide a copy of its internal criteria.  However, the statute only imposes liability on the Plan Administrator (the employer), not the claims administrator (i.e., the insurance company).

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Employers Cannot Shorten FLSA/EPA Limitations Periods in Employment Agreements or Waivers

Yesterday, a unanimous Sixth Circuit reversed an employer’s summary judgment in a claim for unpaid overtime and unequal wages under the Fair Labor Standards Act (FLSA) and Equal Pay Act (EPA). Boaz v. FedEx Customer Information Services, Inc, No. 12-5319 (6^th Cir. 8-6-13).  First, the Court found that the employment agreement could not shorten the statutory limitations period from 2-3 years to 6 months because it constituted an invalid waiver of her FLSA and EPA claims.    Unlike other statutory claims, private settlement agreements or waivers of FLSA and EPA claims are not enforceable. Second, the Court found material factual disputes on the merits of her claims for unpaid overtime and unequal pay.  More interestingly, the Court made some observations about the perceived anti-competitive affects of various types of discrimination.

The plaintiff filed suit in April 2009 alleging that she had been paid less than a male co-worker performing the same job and that she had been denied overtime pay for jobs she held more than six months earlier (when she had been promoted to a new job).  “The statute of limitations for the FLSA is two years for non-wilful violations and three years for wilful ones. 29 U.S.C. § 255(a).”   As long ago as 1946, the Supreme  Court had held that “employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. “  The plaintiff’s employment agreement in this case provided in relevant part that:

 

To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.

The employer argued that employers are allowed to shorten the limitations period for claims brought under other statutes, like Title VII, and should be able to shorten the limitations period for claims brought under the FLSA.   However, the Court rejected that argument because, unlike the FLSA, employees are permitted to privately settle and waive their claims under Title VII.  In addition, in a startling observation, the Court stated:

Second—and relatedly—an employer that pays an employee less than minimum wage arguably gains a competitive advantage by doing so. See Citicorp Indus. Credit, Inc. v. Brock, 483 U.S. 27, 36 (1987). An employer who refuses to hire African-Americans or some other racial group does not. The Court’s rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.

The employer next argued that employees are allowed to waive their right to a judicial forum under the FLSA by signing arbitration agreements because the prohibition against private waivers has been held to only apply to substantive rights and not procedural ones.  However, the Court distinguished this precedent by noting that waiving the judicial forum still allows for the effective vindication of the employee’s claim, while the shortened limitations period in the plaintiff’s employment agreement “at issue here does the opposite.”  Therefore, because the limitations provision in the employment agreement operated as a waiver of her claims, “it is invalid.”

The Court held that this reasoning applied with equal force to the plaintiff’s EPA claims because Congress amended the FLSA in 1963 to include the EPA.   Moreover, in contrast to what the Court said (above) about the anti-competitive effects of Title VII, it made the following observation about the EPA:

Second, the Supreme Court’s rationale for barring waiver of FLSA claims appears fully applicable to claims under the Equal Pay Act. An employer who pays women less than a lawful wage might gain the same competitive advantage as an employer who pays less than minimum wage. Indeed the Court has said that “[t]he whole purpose of the [Equal Pay Act] was to require that the[] depressed wages [of women] be raised, in part as a matter of simple justice to the employees themselves, but also as a matter of market economics[.]” Corning Glass Works v. Brennan, 417 U.S. 188, 207 (1974).

The Court also rejected other potential bases to affirm the summary judgment.  For instance, the Court refused to credit the plaintiff’s deposition admission that she had been an exempt employee:

An employee’s subjective belief that her position was exempt from the FLSA, however, does not mean the position was exempt as a matter of law. Cf. Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 300–01 (1985) (witnesses’ testimony that they were volunteers was not dispositive of whether they were actually employees under the FLSA). Were it otherwise, an employer could obtain waivers of FLSA  claims  merely by having its employees sign a form stating that they are exempt. FedEx is therefore not entitled to summary judgment on this ground.

The Court found material factual disputes in the employer’s remaining arguments about comparative employees and affirmative defenses.  Therefore, the case was remanded back to the trial court.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Trade Secret Defendants Outsmarted Themselves Out of a Statue of Limitations Defense and into a Trial

Earlier this month, the Sixth Circuit reversed summary judgment for the defendants in a theft of trade secrets case because they were too successful in arguing one of their substantive theories (that there had been no misappropriation) so as to undercut what had been a successful statute of limitations argument.   Kendall Holdings, Ltd v. Eden Cryogenics, LLC, No. 12-3258 (6^th Cir. 4-5-13).   The defendants argued – and the trial court agreed --  that the individual defendant’s retention of arguably trade secret materials in 1999 started the four-year statute of limitations on any claim for theft of trade secrets and, therefore, the claim was time-barred by the time it was brought in 2007.  However, the Court found that the former president’s acquiescence in the individual defendant’s possession meant that the possession did not constitute misappropriation and the clock did not start to run in 1999.  Therefore, it was only after the plaintiff learned that the defendants had begun improperly utilizing the materials in 2007 that the statute of limitations began. 

The facts of the case are fairly complicated. Each of the two individual defendants had at various times worked in differing capacities for the plaintiff’s predecessor company. In 1999, one of the individual defendants left employment with the plaintiff’s predecessor company while still in possession of arguably trade secret backup materials (which he and/or some of the other defendants may have helped develop). He then worked for a competitor until returning to work for the plaintiff company for a few months in 2004. He was never asked to return the trade secret materials of the plaintiff’s predecessor and did not arguably begin to use those materials to benefit the defendant company until 2006 -- 7 years after he last worked for the plaintiff’s predecessor and about 8 years before the lawsuit was filed. Meanwhile, the former president of the plaintiff’s predecessor (who was also an individual defendant employed by the defendant company) testified that he was aware that the other individual defendant still had the arguably trade secret materials in his possession in 1999 and never requested their return before he was fired by the plaintiff company in 2004 and before he formed the defendant company in 2006.

The  Court’s analysis was fairly straightforward:

Under OUTSA, a plaintiff may recover damages from a party that misappropriated the plaintiff’s trade secrets. Ohio Rev. Code § 1333.63(A). “Misappropriation” is defined in the statute as the “[a]cquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means”; or the disclosure or use of another’s trade secret without the other’s consent, if the discloser/user acquired it by improper means, in breach of a duty of secrecy, or with the knowledge that it was a trade secret and had been acquired by accident or mistake. Ohio Rev. Code §  1333.61(B). “Improper means” include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Ohio Rev. Code § 1333.61(A). An action must be brought “within four years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.” Ohio Rev. Code § 1333.66.

The Court noted that the statute of limitations generally does not begin to run until the plaintiff suffers an injury, and does not begin to run under the discovery rule until the plaintiff discovers or reasonably should have discovered that it has been injured.  The trial court concluded that the statute began to run when the plaintiff’s predecessor company knew – or reasonably should have known – that the individual defendant had “unlawfully acquired, disclosed, or used its trade secret information.”  The president of the plaintiff’s predecessor admitted that he knew the individual defendant had retained the trade secret information in 1999 and did not ask for their return even when the defendant went to work for a competitor of the plaintiff’s predecessor.   Therefore, the trial court had concluded that the plaintiff’s predecessor had knowledge of the misappropriation approximately eight years before the lawsuit was filed.

The Sixth Circuit rejected this analysis because there was disputed evidence that the individual defendant had properly acquired the trade secret information in 1999 (based on a convincing argument on the merits asserted by the defendants).   Indeed, the individual defendant convincingly argued that he had the plaintiff’s predecessor’s consent to retain the information in 1999.  As noted by the Sixth Circuit:

In other words, in an attempt to demonstrate that [the plaintiff’s] substantive claim of trade secret misappropriation lacked merit, defendants introduced evidence that fatally undermined their statute of limitations argument.

                . . ..  .

Had [the trial court] viewed the evidence in the light most favorable to [the plaintiff]– evidence introduced, ironically enough, by [its] adversary – no cause of action for misappropriation could have arisen in 1999 because evidence in the record supports a finding that [the individual defendant] did not acquire the shop drawings in breach of any duty or by other improper means.

Therefore, there was no undisputed issue of fact that the materials had been misappropriated more than four years before the lawsuit was filed since the defendant arguably had consent to retain them in 1999.  (Remember the statute of limitations is an affirmative defense for which the defendant bears the burden of proof).  Moreover, there was no undisputed issue of fact on the misappropriation claim because the plaintiff remarkably argued that the defendants conspired to take the information in 1999 with plans to use it six years later and that the defendants did not have permission to ever use the materials even if they arguably had permission in 1999 to retain them.   Thus, a plausible argument existed that the materials were not misappropriated until 2006 when the defendants first began to use them in competition against plaintiff.

All this being said, the parties must now go to trial on the issues instead of having them resolved on a motion.  There has been no finding on liability.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Shortened Limitations Period for Written Contracts

 Ohio employers with document retention policies generally maintain copies of written contracts for at least 15 years because that is the period of time in which the other party could bring a lawsuit for breach of it.   However, in June, the General Assembly shortened the limitations period from 15 years to 8 years, effective September 28, 2012.  Actions which accrued prior to September 28 must be brought within the former 15 year limitations period or before September 28, 2020, whichever date comes first.   New breach of contract actions which accrue or arise after September 28, 2012 are limited to 8 years.  Employers may want to accordingly modify their document retention policies. 

The enrolled version of Senate Bill 224 provides as follows:

SECTION 1. That section 2305.06 of the Revised Code be amended to read as follows:

Sec. 2305.06. Except as provided in sections 126.301 and 1302.98 of the Revised Code, an action upon a specialty or an agreement, contract, or promise in writing shall be brought within fifteen eight years after the cause thereof of action accrued.

SECTION 2. That existing section 2305.06 of the Revised Code is hereby repealed.

SECTION 3. Subject to Section 4 of this act, section 2305.06 of the Revised Code, as amended by this act, applies to actions in which the cause of action accrues on or after the effective date of this act.

Section 4. For causes of action that are governed by section 2305.06 of the Revised Code and accrued prior to the effective date of this act, the period of limitations shall be eight years from the effective date of this act or the expiration of the period of limitations in effect prior to the effective date of this act, whichever occurs first.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Senate Passes Ledbetter Fair Pay Act of 2009

Yesterday, by a vote of 61-39, the Senate passed the Ledbetter Fair Pay Act of 2009 in order to reverse the 2007 Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, which held that the statute of limitations under Title VII begins to run when a discriminatory pay decision is announced and/or implemented is not renewed with each subsequent paycheck. (The FLSA and companion Equal Pay Act already run with each illegal paycheck). The Act was already passed by the House of Representatives earlier in January and President Obama is expected to sign it. [Editor's Note: The White House blog confirms that he expects to sign the Senate version of the Ledbetter Act. http://www.whitehouse.gov/now-comes-lilly-ledbetter/]

The Ledbetter Act provides as follows:
• Nothing in the Act “is intended to change current law treatment of when pension distributions are considered paid.”
• An unlawful discriminatory compensation practice occurs under Title VII, the Americans With Disabilities Act (“ADA”), the Rehabilitation Act of 1973, and the Age Discrimination in Employment Act (“ADEA”) “when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits or other compensation is paid, resulting in whole or in part from such a decision or other practice.
• In addition to relief provided by Title VII and 42 U.S.C. § 1981a [i.e., compensatory and punitive damages], an aggrieved person may obtain relief, including recovery of back pay for up to two years preceding the filing of the Charge of Discrimination when the unlawful employment practices that have occurred during the charge filing period are similar to or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge.

Interestingly, the Act provides that it should take effect as if enacted on May 28, 2007 – the day before the Supreme Court’s 2007 Ledbetter decision -- and apply to all claims of discrimination in compensation under Title VII, the ADEA, the ADA and the Rehabilitation Act which are pending on or after that date. In that this provision would impose retroactive liability on defendants in lawsuits (which may no longer be pending) where the defendants were not otherwise liable under then-existing laws, there may be a constitutional challenge made to any retroactive application. In other words, Congress is attempting to substitute itself for the judicial branch and impose liability on Goodyear and other employers which the Supreme Court and other courts already dismissed more than 17 months ago.

Insomniacs may read the legislation in full at http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=111&session=1&vote=00014

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Supreme Court Limits Federal Civil Rights Claims to Two Years.

Yesterday, the Ohio Supreme Court decided that Ohio Revised Code § 2305.10’s two year statute of limitations applied to federal civil rights claims – such as § 1983 claims -- which lack a federal statute of limitations. Nadra v. Mbah, 2008-Ohio-3918. Section 1983 claims are frequently brought against government entities, agencies, employees and officers by government employees and regular citizens alleging that the plaintiff’s federal civil rights were violated under color of state law.

In Nadra, Franklin County Children Services employees and the Columbus Police investigated plaintiff’s home and found her “nine-year-old son locked in the basement. On January 3, 2002,” defendant FCCS employees “filed a complaint alleging that Nadra punished her son by locking him in the basement, chaining him to a pole at times, withholding food from him, and making him use a bucket as a toilet. Consequently, the complaint asserted that Nadra’s son was abused, neglected, and dependent.” Custody was eventually awarded to the child’s father and a jury acquitted plaintiff of criminal charges filed in the matter. Thereafter – more than two years after the child had been removed from her home, the plaintiff filed suit against the children services employees alleging that they violated her civil rights under color of state law under § 1983.

Writing for the majority, Justice Stratton wrote that the court was “asked to determine which statute of limitations governs actions filed in Ohio under Section 1983, Title 42, U.S. Code. The Supreme Court has instructed that in Section 1983 actions, courts must apply a state’s general or residual statute of limitations that governs personal-injury actions. Owens v. Okure (1989), 488 U.S. 235, 109 S.Ct. 573, 102 L.Ed.2d 594. We hold that R.C. 2305.10, which contains a two-year limitations period, is Ohio’s general statute of limitations governing personal injury in Ohio. Therefore, we reverse the judgment of the court of appeals.”

The dissent and the Franklin County Court of Appeals had concluded that the four-year statute of limitations in O.R.C. § 2505.09 applied. R.C. 2305.09 provides in relevant part that: “An action for any of the following causes of action shall be brought within four years after the cause thereof accrued: * * * (D) For an injury to the rights of the plaintiff not arising on contract nor enumerated in sections, 2305.10 to 2305.12 * * * of the Revised Code.” In contrast, the statute which the Court found to apply provides in relevant part that “an action “for bodily injury or injuring personal property shall be brought within two years” after the cause of action accrues.”

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/0/2008/2008-Ohio-3918.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.